Proposal A and Your Property Taxes

On March 15, 1994 the voters in Michigan approved a constitutional amendment known as Proposal A. This amendment changed how property taxes will be levied. Assessed Value? State Equalized Value? Capped Value? Taxable Value? What are these values and how do they affect me?

STATE EQUALIZED VALUE (SEV): the assessed value as finalized by the County and State Equalization Process. In most municipalities the SEV and AV will be the same. If there was an Ownership Transfer on your property last year, your taxable value for the current year will be the same as your SEV.

CAPPED VALUE: last years taxable value minus any losses (ie: demolition of house or garage), increased by the consumer price index (CPI) or 5% whichever is least, plus any additions (ie: new construction or improvements).

TAXABLE VALUE (TV): simply the lesser of State Equalized Value or Capped Value. Taxable Value is what your taxes will be based on!

Example 1Last year a home in Brighton had a true cash value of $150,000. The State Equalized Value was $75,000 and the taxable value was $64,000. Sales of comparable homes in the neighborhood reflect a 5% decrease. The consumer price index (CPI) for 2017 is 1.009%.

2017 AV

$71,250

2017 SEV (tentative)

$71,250

2017 Capped Value

$64,500 ($64,000 x 1.009), rounded

2017 Taxable Value

$64,500

Example 2Last year a home in Brighton had a true cash value of $150,000. The State Equalized Value was $75,000 and the taxable value was $64,000. The homeowner added a family room valued at $20,000. The current true cash value of the home is $155,000. The consumer price index (CPI) for 2017 is 1.009%.

2017 AV

$77,500

2017 SEV (tentative)

$77,500

2017 Capped Value

$74,500 ($64,000 x 1.009) plus $10,000 (50% addition)

2017 Taxable Value

$74,500

Example 3Last year a home in Brighton had a true cash value of $150,000. The State Equalized Value was $75,000 and the taxable value was $64,000. Last year there was a sale or transfer of ownership on the property. Sales of comparable homes in the neighborhood reflect a 5% decrease. The consumer price index (CPI) for 2010 is .997%.